33 F. 544 -

33 F1d 544

class="ad-unit">

Advertisement

Case Text

544

FEDERAL REPORTER.

questionofterms upon which the case was opened for new evidfmce was left to this hearing. It seems just that the defendants' should take no costs other than such as may be necessary on the accounting, and that the orator's costs to the re6pening of the case should be deducted from those, or from the money in his hands. Let a decree be entered that account be taken of the money collected upon these securities; and that the amount ,thereof, when ascertained, belongs, with the remainder of the securities and the Swanton Bank stock and Wright contract before decreed, to the defendants the assignees, to be paid and delivered by the orator to them, deducting his costs to the reopening of the case, and with necessar,}' costs of the ing to the defendants.

FISHER

v.

CRESCENT INS. Co.

(Oircuit (Jourt,

w: D. North

(Jaroiina. November Term, 1887.)

t.

INSURANCE-REPRESENTATIONS-WARRANTY;

An express warranty by one insured as to the circumstances of the insured property, binds him he pe mistaken in fact or willfully misrepresents, while representations not amounting to a warranty will protect insurers only if willfully erroneous, or grossly negligent, in character.1

2.

SAME-Loss...-PROOF.

Where a party shows the manner of keeping his account of stock and making his inventories, and he shows the amount of stock as appeared by these accounts, and testifies that he believes it to be correct, it is evidence on which the jury, if th,eybeUeve him, may tind the amount of such stock whicl1 has been destroye'd by fire. . ' '.' . A stipulation' in an insurance policy to give notiCe of loss. if any occurred, "forthwith/!': is satisfied by an immediate notice to a local agent, who transfers it in a short time to a general agent.
, '

8.SAME-Loss-NoTICE.

4. ,

G.

SAME-Loss-WAIVER OF PROOF.

Questions' as to the sufficiency of proof of loss by tire of insured property, were waived by the examination of the premises by the ,company's authorized agent. who investigated the loss, and refused to pay it. ' Market value, and not local or peculiar value, of property destroyed by tire, and which can be procured in the market. must control in estimating the loss. goods under false pretenses tends to im.

DICK, J., (chargingj1'ry.) The counsel, in their arguments to the court, have discussed certain questions of law that cannot be properly decided and applied irisettling the rights of the parties, until the questions of
lSee Insurance Co. v. Fisher. 80 Fed. Rep. 662.

FISHER ". CRESCENT INS. CO.

545

fact presented in the issues submitted to you are determined by your verdict. Tb:e counsel have agreed as to the response that you are to make to three of the issues, and you must decide the other issues in accordance with the weight of the evidence. In order that you may have a more intelligible view of the legal bearing of these questions of fact, I will state some general principles of law that relate to this controversy. When parties deal with each other on equal footing, the law presumes th&t they understand their rights and best interests, and can take care of themselves. A vendor may commend his goods in extravagant terms, and incur no legal responsibility thereby, if he uses no unfair means of concealment and deceit, and the purchaser has an opportunity to examine for himself. Where one party possesses superior means of knowledge, and knows that the other party relies upon him for correct information, his representations must be correct. Thus the manufacturer has a better knowledge of the articles he manufactures than a purchaser, who knows what he wants, but is not familiar with the quality and fitness of the article, but relies upon the judgment of the maker. In such case the law implies a warranty from the representations made by the vendor as to the quality and fitness of the article for the purposes designed. In cases of contracts for insurance the parties are not, in all respects, on equal footing, as the applicant for insurance has a better knowledge of the subject-matter of the contract than the insurer, who must rely upon the statements of the applicant. The highest good faith is therefore required of such applicant; and he must make truthful representations, as far as he possesses actual knowledge, or has convenient means and opportunity of acquiring correct information,and he must conceal nothing that is material to the risk or to the liability to be incurred by the insurer. Insurers can secure for themselves full protection against untrue or erroneous statements by requiring from the insured express warranties upon all material matters involved in the transaction. By an express warranty the insured stipulates for the absolute truth of his statements. Good faith and honest purpose will not exCuse error. The statements must be entirely true, or the warranty is not fulfilled. The law affords protection and remedy to insurers only when representations and concealments are willfully false. deceitful, fraudulent, or grossly negligent. When the applicant makes a statement according to his best knowledge and belief, and has availed himself of all means of information conveniently and reasonably within his power, such statement, although untrue or inaccurate, will not avoid the policy of insurance, if it is fairly made, and honestly believed to be true; There must be some element of fraud, willful falsehood, or gross negligence in representations before they will vitiate ()r avoid a policy of insurance. The testimony of the plaintiff is the principal evidence as to the condition, quantity, and value of the whisky in the bonded warehouse at the time of its destruction by fire. The credibility of this testimony was impeached by the cross-examination. The plaintiff, in reply to questions, stated that he had been tried and convicted in a state court at v.33F.no.8-35

546

,

FEDERAL RJllPORTER. '

Charlotte UpQtl an:indictrnent for obtaining goods: undE!:t'Jalse pretenses, and was sentenced by the court to four years' imptisonmltntin the penitentiary at,Raleighjand that such sentence ofimprisonment was rernittedupoahis making satisfaction for the goods obtained, and paying a fine. You have the right to consider this matter in passing upon the credibility ofhis testimony, and also the fact th/lt he has testified in his own behalf; but still you may believe him, if, upon considering his conduct on the witness stand under cross-examination, and the reasonableness and testimony, you regard, him as worthy of belief. The first controverted issue requires. you to determine whether the plaintiff made a true representation as to his last inventory of stock of whisky in the bonded warehouse on the eighteenth of November, 1884. An inventory is a written list of goods and chattels', It mayor may not contain tbe estimated value of such property. In the case of executors l;tIld, adlillinistrators, the law requires such officers to make a full, true, and accurate description and estimate of all the personal property in possession orin action, to which they are entitled, and for which they are responsible in their official capacity. It is the mode adopted by the law for charging them on their own oaths with goods and chattels which have, or with.:reasonable diligence should have, come into their hands for the benefitJofthecreditors and next of kin ofthe teetatororintestate. If they charge. themselves, with goods and credits at a certain estimated value, the burden of proof is upon them in showing that such articles w.erenot, by prudent management, of the estimated value in producing assets. Prudent executors administrators are, therefore, careful in makinK such. estimates of'vaJue.; and:unless they are a.bsolutely sure of the solvency of credits, they are returned as doubtful, In aU kinds of business, estimation of value is generally regarded as matter of opinion, and not as positive knowledge. Inventories are often made by merchants for the. purpose of ascertaining the condition of their mercantile business, l;tIld: cost prices are generally stated. When an inventory of stock has once been carefully and accurately taken, and only slight changes are sUbsequently made, which do not materially alter the condition of the goods, or pro.duce confusion in the arrangement, and such changes are noted on' the old inventory,· the amended inventory may well be regarded tts sufficient to afford correct information to persons interested as to the amount .and estimated value of the stock in store. , the plaintiff, as ,a distiller; manufactured whisky, he was required by law. to keep the proper books, and make out sworn monthly statements in triplicate, showing the amount and condition of the whisky by him and placed in the bonded warehouse. He has testified that such books were kept by. him, and such triplica.te statements were regularly made ;out and forwarded as directed by law; that after the ,suspension of his distillery, in September, 1884, he sent his books to the collector of the district residing in a distant town, and that he had no means conveniently within his power of ascertaining the amount of whisky in the bonded warehouse under the exclusive cus-

tody and '&introl of .the who was absent in·a· distani· town, except the book of the store-keeper, who was required by law to keep in such book a detailed and accurate account of the condition and quantity of the whisky in the warehouse; and that he carefully examined such book, with the aid of the local agents of the defendant; that the last withdrawal of whisky was on the eighteenth of November, and was duly noted by the store-keeper with his usual mark for that purpose; and, at the time his application for was signed, he supposed that the wp.rehouse book c6ntained a correct inventory of the amount of whisky in the warehouse; he acted upon such information when he made the statements set forth in his application. Gentlemen of the jury, if you believe this testimony, you can properly find that the last inventory of the whisky was taken on the eighteenth of November, as stated by the plaintiff in his application for insurance. The next issue involves the question of fact whether the plaintiff gave proper and sufficient notice Of 'the destruction of the property by fire. The object of notice, when required by law or by the terms of a contract, is to enable a person to look after his interests, and to secure himself, as far as possible, against injury or loss. The sufficiency of notice-as to the manner and time of giving the same-is often dependent upon the circumstances connected with the matter. Where I;loticeis required, and it relates to something in the fUlure, or to something that ma.y result in injury, if not arrested, averted, or avoided by prompt action, notice should be precise and definite, and be given as soon as possible. Notice of this character may enable the party notified to make proper preparation to meet the emergency. If an event has already occurred, and the situation cannot be changed, and a short delay will produce no material disadvantage, then such notice wiIlbe suffi': clent as will enable a party to make an easy investigation of the causes and attendant circumstances, and thus obtain accurate information as to the transaction. As a general rule, notice to an agent who has conducted or ha.s been active as a party to a transaction, is sufficient constructive notice to his principal in reference to such matter. In this case, the evidence, if believed, shows that the plaintiff, on the morning after the destruction of the whisky by fire, gave notice of the occurrence to the local agents of the defendant, and they, at his instance, at once communicated the fact to a general agent of the company at Charleston, South Carolina, who, in a short time afterwards, acknowledged the receipt of such letter, and promised to send an examiner to investigate and adjust the matter. The stipulation in the policy required the plaintiff to give written notice of his loss,forthwith, to the company. This kind of notice is sufficient, when given with due diligence, under the circumstances of the case. Wheli there are disputes about the· attendant facts. and circumstances, the jury must determine the matter. When there is no controversy about the facts caused by a conflict of testimony, the cotirt may decide the matter as a question of law. Upon this subject I instruct you that the notice was sufficient, and given in reasonable time, if you believe the uncontradicted testimony of the plaintiff.

548

FEDERAL REPORTER.

On the next issue, involving the truth and sufficiency of the proof of shows that the whisky was destroyed on the night of loss, the the twenty-fourth day of December, 1884, and the "proof of loss" was not sent to the company until the nineteenth of February, 1885. It is insisted that this proof of loss did not conform to the terms mentioned in the policy, as it was too long ddayed, and was false in its statements as to the amount and value of the whisky destroyed. On this subject I instruct you not to consider this question, as the proof of loss was unnecessary for the purposes of this action, as it had been waived by the conduct of the investigating agent of the company. He had made a personal ,examination of the loss on the premises, and had written a letter to the plaintiff denying the liability of the company, and making a di. rect and positive refusal to pay, and setting forth the grounds and reasons for such refusal. The last issue requires you to ascertain the value of the whisky destroyed. I instruct you to find from the evidence what was the market value at the time of the fire. The plaintiff has stated to you in his testimony what was the local value to him in his business as a retail dealer of whisky, but this must not control your verdict. The parties to the policy have fixed the method Qfascertaiuing the value by the express term, "that the cost value of prpperty destroyed or damaged shall in no case exceed what would be the cost t9 the assured, at the time of the fire, of replacing the same." Whisky is a commodity that has a market value in the wholesale trade, dependent usually upon the condition of supply and demand. From the evidence you must ascertain that value at the time of the loss. You must not be governed in your estimate by the evidence tending to SllOW the high local value of whisky by the scarcity of corn in 1884 in that section of country. The plaintiff resided near a railway, and the markets of the country were convenient to him; and he. had the opportunity of purchasing at market price whisky equal in quality to the article destroyed. When you return your verdict the court will be able to apply matters of law that arise, and render the proper judgment.PROCEEDWGS AFTER VERDICT.

The jury found all the issues submitted to them on the evidence in favor of the plaintiff, except the. One as to the value of the whisky; and they assessed the value at $1.50 per gallon. By the agreement of coun!;leI the jury found the quantity in the warehouse to be 852 gallons. rhe counsel then moved for judgment in favor of defendant; as, by an express provision in the policy, it was avoided. as the quantity and value of the whisky were much less than the amount stipulated for in the warranty made by the plaintiff in his application for insurance. On this question of law the court was of right opinion adverse to the defendant, and the motion was denied, but the counsel were informed that the matter would be again considered on a motion for a new trial. The court being of opinion that the market value assessed by thejury ",as greater than was warranted evidence, the counsel of the plain-

FISHER V. CRESCENT INS. CO.

549

tiff agreed. that the value should be reduced to $1.25 per gallon, and judgment was entered of record. Motion for new trial was entered and continued to the term of this court at Charlotte.

FISHER 'D. CRESCENT INS.

Co.

(Oircuit OOU'I't,

w: D. North

Oa'l'olina. December Term, 1887.)

INSURANCE-REPREBENTATIONS-WARRANTY.

A covenant in an application for insurance, after stating the circumstances and value of the property to be insured, recited "that the foregoing is a just, true, and full exposition of all the facts and circumstances in regard to the con· dition, situation, and value of the propertv to be insured, so far as the same are known to the applicant; and the same is hereby made a condition of the insurance, and a warranty on the part of the ilisured." Held that, in the absence of fraud or gross negligence, the insurance company was not relieved from the, contract of insurance by incorrect representations. 1

On Motion for a New Trial. H. a. Jones and a. M. Jordan, for plaintift. BurweU Walker and F. I. Osborne, for defendant.

DICK, J. In considering this motion for a new trial we are called upon to construe the covenant and agreement of the plaintiff contained in the following clause of his ,application for insurance: "And the said applicant hereby covenants and agrees, to and with the said company, that the foregoing is a just, true, and full exposition of all the facts and circumstances in regard to the condition, situation, and value of the property to be insured, so far as the same are known to the applicant; and the same is hereby ma1e a c:ondition of the insurance, and a warranty on the part of the insured." This clause was prepared by the experienced and skillful agents of the company, and was printed in the form of application used in its general business; and in construction the words thus carefully and purposely employed must be taken most strongly against the party who formed and furnished the instrument to the applicant. If this clause was intended by the company to be a strict warranty, then the words, "so far as the same are known to the applicant," are unnecessary, and are well'calculated to mislead inexperienced and confiding applicants, who listen to and rely upon the urgent and plausible statements and suggestions of eager and expert agents. As both parties to this contract of insurance were required by law to act with entire candor, fairness, and honesty, we may well presume that they fully understood words employed by them in their usual and ordinary meaning, and intended to deal in good faith with each other, and did not contemplate technical objections and
Wilkins v.Insurance Co., (Iowa,) 10. N. W. Rep. 916; Redman v.Insurance Co., (\'\lIS.) 1 N. W. Rep. 393; Insurance Co. v. FIsher, 30 Fed. Rep. 662. '